Does Corporate Governance Shape the Relationship between Corporate Social Responsibility Performance and Financial Distress in Large European Companies?

Yasmine Souissi and Anis Jarboui

International Journal of Finance, Insurance and Risk Management, 2025, vol. 15, issue 1, 57-82

Abstract: Purpose: This paper aims to investigate the moderating effect of corporate governance on the relationship between corporate social responsibility (CSR) performance and financial distress risk. Design/Methodology/Approach: The empirical analysis comprises a panel data set of 2673 observations over the years from 2010 to 2018 for European companies listed in the STOXX Europe 600. Ordinary least squares multiple regression analysis model was used to test the study hypothesis. Findings: The findings suggest that higher CSR performance significantly reduces the financial distress risk of the firm. These results were robust after several statistical checks. In addition, the link between CSR performance and financial distress risk is moderated by corporate governance. In addition, we show that the negative effect of CSR performance on financial distress risk is more pronounced for firms with a good corporate governance practice. Practical Implications: This paper challenges the intuitive expectation that CSR activities impose unnecessary additional costs to firms, which affects performance. Originality/Value: It is suggested that the relationship between CSR and financial distress, in Europe, is different from the one in the USA. Conclusively, our principal result shows that firms with higher CSR performance exhibit a lower degree of financial distress risk for the European sample.

Keywords: Corporate social responsibility; financial distress risk; corporate governance; STOXX Europe 600. (search for similar items in EconPapers)
JEL-codes: G32 G33 G34 L25 M14 (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://journalfirm.com/journal/414/download (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ers:ijfirm:v:15:y:2025:i:1:p:57-82

Access Statistics for this article

More articles in International Journal of Finance, Insurance and Risk Management from International Journal of Finance, Insurance and Risk Management
Bibliographic data for series maintained by Marios Agiomavritis ().